International Environmental Agreements: Emissions Trade, Safety Valves and Escape Clauses

by Larry Karp and Jinhua Zhao

- We explain how the structure of multi-national or multi-regional environmental agreements affect their chance of success. Trade in emissions permits has ambiguous and in some cases surprising effects on both the equilibrium level of abatement, and on the ability to persuade nations or regions to participate in environmental agreements. An escape clause policy and a safety valve policy have essentially the same properties when membership in environmental agreement is pre-determined, but they create markedly different effects on the incentives to join such an agreement.

Karp, L. and J. Zhao (2009). "International Environmental Agreements: Emissions Trade, Safety Valves and Escape Clauses." Department of Agricultural & Resource Economics, UCB. CUDARE Working Paper 1084, May 2009.